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Double benefit in manufacturing

Updated: 2013-04-19 11:19
By Fu Jing in Brussels and Li Xiaokun ( China Daily)

 Double benefit in manufacturing

Justin Lin, one of the most influential economists in China, helps the government and enterprises pick out world economic trends. Jiang Dong / China Daily

Double benefit in manufacturing

Chinese industries can give africa growth spur by setting up factories in Africa, economist says

China's senior political adviser has proposed closer integration with the economies of African countries by moving some of the country's labor-intensive manufacturing industry to the continent.

Justin Lin, former chief economist of the World Bank and professor at Peking University, has recently been proffering ideas based on his extensive experience regarding Africa and research on China's development model.

"China should shift part of its labor-intensive industries to Africa to upgrade the country's economy to an advanced level and help trigger the continent's economic growth," says Lin, who was elected last month as a member of the Standing Committee of the Chinese People's Political Consultative Conference, China's political advisory body.

Following many visits to Africa since he began at the World Bank in 2008, Lin has urged the Chinese government to recognize the continent's advantage of abundant cheap labor and market potential as the cost of labor in China's manufacturing bases increases.

Lin says he has sent a team of researchers from Peking University on field trips to some African countries, and they had concluded that Beijing should consider integrating China and Africa in a business and supply chain.

However, some Chinese businesses that have been active in Africa are concerned about the political stability of some countries, which may cause huge business losses if it leads to unrest.

Lin says Africa faces a similar situation to that of China in the 1980s, and China's industrial streamlining measures could offer it a chance of taking off economically.

Lin's team organized a media briefing in Beijing last month to send this message to Africa shortly before China's newly elected president, Xi Jinping, scheduled a visit to three African nations. Earlier this month, at the Boao economic forum in China's Hainan province, Lin raised the proposal again, and was supported by other delegates.

Lin says Asia's development has mainly resulted from an industrial shift. In the 1960s, when Japan rose economically, the country moved labor-intensive industries to the four "Asian Tigers" - Hong Kong, Taiwan, South Korea and Singapore - and helped them industrialize.

In the 1980s, when China was preparing for economic takeoff, the four tigers had to restructure their economies, and started shifting their industries to China's coastal regions, later labeled as the factory of the world.

"Now, after years of development, it is China's turn to do so and upgrade its role in the industrial chain," Lin says.

Japan moved 8.7 million jobs abroad, while the Asian tigers transferred about 7 million. For China, the figure could be 80 million, he says, and Africa's transition to becoming an industrialized continent could be completed within 20 to 30 years.

Too much labor in Africa revolves around agriculture, Lin says. The transfer of Chinese manufacturing to Africa would increase efficiency and enable the local people to earn more and turn their earnings into capital for further growth, and it would be a sustainable model.

"With close cooperation between Asia and Africa, I believe Africa can be as successful as Asia," he says.

Now that the costs of labor, land and other industrial elements have increased greatly, China's coastal regions have started to shift manufacturing inland and to neighboring countries. The difference in labor costs between coastal and inland regions is as much as 30 percent.

But Lin says many workers in the interior and western provinces have already migrated to the coastal regions, so a sustainable supply of cheap labor will remain a challenge for factories.

"Such advantages will disappear without doubt as China's goal is to double its people's income by 2020 from a 2010 baseline," says Lin, adding that the average monthly payment for labor in inland areas will reach $700 in this time.

"So I would say Africa is an ideal destination for China's labor-intensive industrial shift because this continent offers abundant cheap labor and resources, and it is also closer to the markets in the continent, Europe and America," says Lin, referring to cheaper transport costs.

Lin believes China can also be integrated into the supply chain by offering mechanical equipment, research and development and other value-added services.

"This is a necessary process for China to avoid the medium-income trap and upgrade its economy," he says.

"African countries are commonly low-income economies and they don't have obstacles of trade quotas. So if we invest in Africa, we could decrease our trade surplus with European and American countries."

He notes that the US and Europe have occasionally used trade protectionist policies to boycott China's exports.

With his help, Lin says he has already persuaded a leading shoe-making company to move to an African country, offering many job opportunities.

African economists have followed Western theories since the end of World War II, yet the continent is still mostly poor, and in some places, in chaos, despite the huge development potential, he says.

"It is pitiful that there is no successful African case resulting from Western development models over the past 60 years.

"African countries should use their cheap labor, rich resources and close proximity to markets to develop their economies.

"In this way, China's economic and development model in previous decades can be an example."

Contact the writers at fujing@chinadaily.com.cn and lixiaokun@chinadaily.com.cn

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